The social aspect of sharing a movie with friends, family and strangers is such a strong part of our tradition. There is something about the movies that gives it the theatrical urgency; whether it is a small budget horror film; a gigantic event film or a mid-budget original drama. Seeing the audience show up invigorates the idea of going to the movies. The power of the movies is such that Mufasa’s death in Disney’s 1994 The Lion King is embedded in our memories as ‘the circle of life’ encompassing dreams and emotions. From silent black and white movies to present day digital, the journey of popular cinema has not lost its charm to either videos or Netflix.

 

 

Indeed, the cinema industry has set the standards in entertainment and culture and wherever it has done so successfully, it has had the sponsorship and support of the State. The cinema industry is perhaps one of the hardest-hit industries in the face of COVID-19. The impact of this prolonged closure has led to the closure of businesses permanently, the loss of jobs and dwindled Sri Lanka’s position in the global entertainment playing field. This article will be an endeavour to examine the chronology of the Sri Lankan cinema industry, following its cycle of nationalisation and privatisation, and identify the gaps in the industry that the impact of COVID-19 has most certainly widened. Following this examination, potential recommendations for reform will be proposed to salvage and rebuild the industry. 

 

 

The transition that occurred during Sri Lanka’s early years of civil war, led to the creation of a centralised film distribution body known as the National Film Corporation (“NFC”). The advent of which significantly contributed to the decline of the cinema industry in Sri Lanka. The NFC was established as a result of The National Film Corporation of Sri Lanka Act 1971 (“NFC Act”) that took over the business from the private sector, without paying any compensation to their efforts in the past. The Gazette notification 2130/16 dated July 3, 2019 states that “all tasks pertaining to distribution of films including the scheduling of films for Cinema Halls, releasing films for screening and collection of income on distribution will be performed, from the date, totally by the NFC of Sri Lanka.

 

The system for importing films by the NFC included obtaining the written approval of the Chairman of the Corporation, fulfilling all conditions as per the importation policy issued by the Corporation to be followed before the importation of films. Furthermore, local films are released by the NFC once the films are approved by the Public Performance Board and the Board issues a certificate. There is no proper classification or guidelines by the regulator for domestic film releases, thereby forcing content on cinemas and patrons. The cinemas should be allowed to curate their own content based on audience and market preferences. These practices have also created a substantial distribution backlog of nearly 100 nationally produced films that were waiting to be screened. Additionally, major foreign studios were not interested in working with the industry in Sri Lanka where the Government had a monopoly over film distribution, and as such, the NFC was unable to import high-quality films.

 

When distribution opened up in 2001, four private film distribution circuits namely Lanka Film Distributors Ltd. (LFD), E.A.P. Films and Theatres Ltd. (EAP), Movie Producers and Importers Ltd. (MPI), Cinema Entertainment Ltd. (CEL) entered the market in addition to the NFC. The allowance for private distribution significantly increased investments and revenue for the industry; most notably through the re-establishment of good relationships with international production houses. The import of films became regular trade once again. 

 

 

 

In July 2019 Sri Lanka’s NFC, re-nationalised film distribution under the administration of the United National Party of Prime Minister Ranil Wickremesinghe, creating a state monopoly that held the final authority and sole distribution rights to the NFC. This was done overnight despite the interim injunction preventing the NFC from handling the distribution of films until the final determination of the case and the extent to which the private sector had tirelessly contributed to the cinema industry of Sri Lanka for several decades was overlooked in such a decision. 

 

 

To say that the cinema industry was severely impacted by the pandemic would be an understatement. The nature of the business itself involves what all governments around the globe have either banned entirely, or actively tried to reduce: a large gathering. The industry ran into great financial difficulties unable to sustain staff and other day-to-day expenses.The entire film industry comprising of both technological and commercial institutions of film making i.e., film production companies, distribution companies, studios, screen writers, actors, film crew, etc. have all perhaps been the most impacted. 

 

Arguably, the cinema industry was facing a slow decline even before the advent of coronavirus, especially with increased popularity for entertainment streaming services such as Netflix, Apple TV and Amazon Prime. In today’s climate, where people have spent more time at home than ever before, the concept of cinema halls themselves are now being questioned. It is worth questioning whether a return to normalcy would include regular trips to the cinema for the vast majority of people. This only explains how pertinent it is for the State to play an active role in the facilitation of the industry’s survival. 

 

 

 

The current laws in Sri Lanka do not provide any relief to the entertainment industry. A prime example of this is the lack of adequate insurance coverage against the losses resulting from a prolonged suspension of business due to the pandemic. The reason is that according to insurers the business interruption coverage would only trigger if the insured property suffers physical damage due to a covered peril such fire, floods and further acts of God that would not cover losses due to a pandemic like Covid-19, and as such whether it is in relation tofilm production or film exhibiting, the range of activities, techniques, personnel and equipment vary and require different insurance solutions.

 

Following the complete closure of cinemas last year, the seating capacity permitted by the Government remains 25%, with the only exception of a direction of 50% seating capacity by the Government for the new movie “Master” which is currently being screened. If this is extended to all movies, it shall be encouraging for the cinema industry. The Government now has a duty to sustain the rebuilding process and relaunch of cinemas in Sri Lanka by encouraging private investment in production of films.

 

Prime Minister Mahinda Rajapaksa had offered tax concessions, during the time he served as President, whichincluded imports of equipment used for film production and screening. When the Prime Minister was the then President, VAT exemptions were granted on production, distribution and exhibition of any film and supply of laboratory facilities for the production of any film. Exemptions were also granted on importation of any film locally produced, VAT was reduced to five per cent and import duty was exempted on importation of specified items used in the film industry. However, the cinema industry continues to struggle under the detrimental policies of the previous Government, which is further compounded by the pandemic. The cinema industry can now be optimistic of the present Government tobring in wide-ranging structural reforms to support growth in the industry as it had done before.

 

The Prime Minister has now proposed to waive off the 10% entertainment tax and distribution commission from all the cinemas for the next two years. Welcoming the move by the Government, a spokesperson for Cinema Entertainment Ltd., noted that despite the levy paid to the NFC and Municipal Council on every ticket sold, there was hardly any service provided to the cinema industry. This tax had a direct impact on producers, importers, distributors and exhibitors, and the elimination of such a tax entirely would be beneficial andwould provide impetus to new investors entering the industry.

 

 

The ideal environment for the industry to thrive appears to lie within a private sector business model where it is fully liberalised and the NFC should be moved away from the operating circuit.

The film hall owners should be allowed and/or encouraged by the State to make better use of their properties for alternative profit making businesses where these film halls are currently struggling to survive due to the current situation. Over-regulation by the NFC is a hindrance to the private sector to make investments into the cinema industry. 

 

Any concessions in duty rates, for example those levied on theatre seats, would be of great assistance to the development of the cinema industry. Moreover, the possibility of providing electricity at a concessional rate ought to be explored with the Government, which would greatly reduce the cost of operating of cinemas. The Government could greatly assist the existing and potential exhibitors by the provision of loans at concessionary interest rate from State Banks, thus institutionalising cinema as an industry. Investment relief to potential investors, along with the provision of land on long-term lease at reasonable rates, are all minor steps that could be undertaken by the Government in order to attract necessary capital for the establishment of new cinemas. 

 

With regard to the aforementioned topic of insurance provided to cinema owners, the insurance regulatory authorities should now also consider extending the scope of business interruption insurance to losses caused by the pandemic at concessionary premiums.

 

Additionally, the quota system in Sri Lanka is not practical as it limits the number of films for importation to each distribution circuit according to the language, which means there are empty screens at cinema halls and such limited competition leads to a drop in the quality of locally produced films. Attracting more foreigners, increased foreign exchange, new businesses, improved infrastructure in Colombo and increased investment in Sri Lanka’s film industry would take the industry to an international level. Furthermore, the imposition of a tax per foreign actor in Sri Lanka does not encourage foreign film productions within the country and this too needs to be addressed.

Perhaps the most effective tool would be the allocation of a state film fund, in the form of a grant to be replenished through contribution from cinemas, to assist in the revival of the cinema industry and film production in Sri Lanka.

Liberalisation of the film industry, and a stabilised political environment would certainly attract both local and foreign investors to invest in the industry. Joint venture productions would further afford local producers much needed international experience and would secure an avenue to screen Sri Lankan films outside the country, potentially tapping into renowned global film festivals. 

 

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. Arguably, the advent of COVID-19 has also brought to light already existing weak structures in the cinema industry, and the period of closure should be utilised to reassess and build a strong framework to facilitate its growth.