Wednesday, August 06, 2003 | |
Industry brief: Movies I Part 2 3 4 5 6 The movie industry as industry is now followed by the general public almost as closely as fans follow the business of professional sports. More and more the daily newspaper entertainment section reads like Variety or Hollywood Reporter, with reports on upcoming projects, financial returns, "bankability" of various stars, and changes in management at the big studios. The weekly film grosses stand beside the Major League Baseball standings and the New York Stock Exchange listings as numbers to keep tabs on. These haven't overshadowed the usual news of Hollywood divorces, love affairs, and drug busts, but they are taking up a bigger part of newspaper gossip columns, television shows (like Entertainment Tonight) and magazines (like Entertainment Weekly). The unending supply of Adam Sandler comedies, gross-out farces, and videohame-based shoot-em-ups pales in comparison with the real melodrama, that of the business behind. the scenes. The movie industry is like the other oligopolies we have look at. The pace of change is accelerating. New, often hidden, forces are putting pressure on every aspect. The existing oligopoly face a bigger gamble every year. But it is possible to track some of those forces; applying the ideas of shelf life, shelf space and mind space can help define the forces behind most Hollywood headlines. There are several major trends in the industry that we will cover later. 1. Movies now have three lives: theater, video, broadcast But this short theatrical shelf life is extended by several afterlives, first as videos to rent or buy (VCR or now DVD), then as TV programs first narrowcast (on pay-per-view, on airplanes, on cable) then broadcast (first on HBO and Cinemax, then on other networks), and, to a growing extent, as downloadables on the Web.. While these after-markets were once incidental to the fiscal health of a movie studio, they now have become a central part of the finance plans of every film. Because of these aftermarkets, all films have now, in theory, an indefinite shelf life. This factor is changing the way movies are made, distributed, and sold. 2. International markets are as important as domestic 3. The blockbuster mentality rules. An average major studio Hollywood film costs between $50-75 million to make. It costs between $30-50 million to market. Most major studio films that make less than $100 million dollars within a year from release are seen as failures, and that includes most of them. An increasing number of films, like Pearl Harbor (2001) and The Matrix Reloaded (2004), have to make well over $200 million to break even. At that level of risk, though, the payoff can be enormous. The example of Titani (1999) has wiped out the memory of many expensive bombs. From a studio's point of view, it's better to swing for the fences than try to get singles and stolen bases, even if you strike out most of the time. The ideal is getting global mindspace, as Titanic did, to drive the after-markets. These have a magnifying effect on the few big winners, making them all the more critical to a studio's fortunes. 4. Turmoil rules the industry - concentration, near bankruptcy, mergers and acquisitions For these reasons, all parts of the industry are tending toward tightly controlled oligopolies run by large international media companies. Their objective is to build a structure that minimizes risk, one that, within the variations in public taste, can help deliver steady profits. Of course, making interesting films might be a solution, but that's only a minor determinant. The key is controlling shelf space and finding ways to gain mind space for a global audience. 4:35:36 PM |