Why nationalisation signals ‘The End’ of the film industry

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

By Aneetha Warusavitarana

Now that film distribution has been nationalised, Sri Lankan consumers may have to bid farewell to their beloved Marvel, DC, and Disney movies. All rights to film distribution are now vested solely with the government-owned National Film Corporation (NFC). The reality will be that consumers and cinema hall owners will suffer. While we consumers will now have to wait until the latest Marvel movie passes through this new bureaucracy to watch it, cinema hall owners will lose almost all decision-making power regarding which film they wish to screen, when they wish to screen, and for how long they wish to screen.

Looking at the “Methodology for Distribution and Screening of Films” of the NFC, the system for importing films is now as follows: “Registered importers should obtain the written approval of the Chairman of the Corporation (hereinafter referred to as ‘Chairman’), fulfilling all conditions as per the importation policy issued by the Corporation to be followed before (the) importation of films.”

Once the registered importer obtains the written approval of the Chairman of the NFC and imports the film, the film has to be handed over to the NFC. The NFC will then submit the film for approval to the Public Performance Board and if the Board issues the certificate, the NFC will distribute the film. In other words, written permission from the Government is required before a film is imported into the country, and once the film is imported, it is handed over entirely to the Government for approval until the point of screening.

It is no wonder there are fears that these businesses will not be able to remain profitable under such restrictions. Now that a second wave of nationalisation has hit film distribution in the country, it would be wise to take a step back and look at what happened the last time distribution was in the hands of the government.

Back to the 70s

In 1971, the then government stepped in and centralised all film distribution under the NFC. The result was the performance of the industry declining, as highlighted in the 1997 Senaka Bandaranayake committee report. To extract a few key points from the report, with the NFC having a complete monopoly over the distribution of films, the quality of films that were screened dropped. Even though cinema halls were empty – a reflection of movie quality – cinema halls had to continue screening. The drop in attendance and poor return on investment meant that there was a resultant deterioration in the quality of cinema halls and overall viewing experience. Inefficiencies in the NFC created a substantial distribution backlog of nearly 100 nationally produced films that were waiting to be screened. The report also notes that major foreign studios were not interested in working with a country where the government had a monopoly over film distribution, and as such, the NFC was unable to import high-quality films which would attract audiences and bring in revenue.

Prior to the nationalisation of distribution, the government was already a player in the industry – and when looking at the most basic mandate of the government, this should not be the case. Given that film distribution is a part of the entertainment industry, and is not an essential service, the role of the government is clearer – it should step out and limit its influence to that of a regulator. An argument that drives this second wave of nationalisation is that we need to promote locally produced films. While fostering local talent is not in itself a questionable objective, it will not be achieved through the nationalisation of film distribution. When the NFC last had sole distribution rights, it is difficult to say that there was a positive impact on the local film production industry. The backlog of locally produced films to be screened and empty cinema halls are not indicators of a thriving local production industry.

If the government is truly interested in local film production, then investment should be directed there – centralising the distribution of films removes competition, lowers standards, and does not create an environment where local film production will thrive.

Growth under private distribution

The takeaways from the report are clear – in the past, having the NFC as the sole distributor of films was detrimental to the industry. The growth that the industry has seen since then further exemplifies this point. When distribution was opened up in 2001 and four private film distribution circuits entered the market in addition to the NFC, there were approximately 137 screens running. Based on conversations with the industry, this number has now risen to over 200 under private film distribution. The increase in the number of screens is indicative of the investment that poured in once private distribution was allowed. Private investment will not pour into an ineffective business model – once private distribution was allowed, these circuits re-established good relationships with international production houses, and were able to import films that would draw audiences and generate revenue.

What are the consequences?

Given that these conversations have been taking place since last year, it is unfortunate that the result was the nationalisation of distribution. The industry is likely to be hit hard. Nationalising film distribution means that cinema halls will be able to screen a movie only once it has navigated the minefield of regulations, corruption, and general confusion that is the government – in other words, long after the movie premieres internationally. They will then only be able to screen this movie on dates dictated by the NFC, and for a time period also dictated by the NFC. The issues that crippled the industry post 1971 are likely to resurface.

In a context where the cinema industry has to face competition from movie piracy and online streaming services, releasing movies as they premier internationally and re-inventing the experience of watching a movie in a cinema is vital. The chances are that local cinema businesses will suffer as a result of this decision.

As consumers, we will not be better off – no one wants to wait a few months, run the risk of seeing multiple spoilers online, and miss fandom conversations just for the experience of watching it at the cinema. If the movie were to premier at the same time it premiers internationally, there would be no question about it. It’s also important to reiterate that the country faced a growth in cinema halls once distribution opened up – private distribution led to a clear increase in investment and growth, and it is regrettable that we have taken a step backwards.