1. Economic Foundations for Entertainment and Media
Windowing and Revenue Streams

2. Following the movie money
Box office revenues overstate success
Net box office revenues are not the major source of revenue
Pay attention to profit, not revenue
Profit is part of a larger movie enterprise
Movie studio profits are part of a larger corporate enterprise

3. Indie Box Office Revenues
Benedetta Lucini, “Analyzing the ROI of Independently Financed Films,” Stern SoB, MBA

4. Trend in Revenue Source of Revenue
Box office revenue is not the main event for the movie industry.
Trend in Revenue
Source of Revenue
Careful! This is 6, not 0.
DVD data:

5. 2012 Studio Revenue Sources
Film Studio Revenues: 2004, 2008, 2009
The share of theatrical rose from 2004 to 2008, from 20% to 25%.
This is consumer spending. Half of the revenue went to exhibitors.
2012 Studio Revenue Sources

6. Studio Revenue vs. Profits
We need to distinguish between revenue and profit. TV appears to be the main profit center. But, the figures allocate the entire production cost to theatrical. This is grossly misleading

7. It gets worse!
The studios are embedded in larger conglomerate corporations.
How should studio “profits” be allocated?

8. Capturing Value – Films and More The movie is rarely a one off project.
Multiple release windows
A form of price discrimination
Market segmentation
(Can this be applied to the music business?)
The movie as product line
What is the source of “value” generated by a movie?
Successful strategies
Movie as part of a product line
Batman: print media, movies, home video, domestic TV, foreign TV, licensing and merchandise, Broadway show
Harry Potter: Books  movies  infinite line of products
Fast and Furious: Videoames, toys and models, movies
Taylor Swift: Concerts, televised specials, movie(s?), lunch boxes, awards shows, etc.

9. Capturing Value – Films and More The movie is rarely a one off project.
Multiple release windows
A form of price discrimination
Market segmentation
(Can this be applied to the music business?)
The movie as product line
What is the source of “value” generated by a movie?
Successful strategies
E.g., Star Wars
Product line
Batman: print media, movies, home video, domestic TV, foreign TV, licensing and merchandise, Broadway show
Harry Potter: Books  movies  infinite line of products
Fast and Furious: Videoames, toys and models, movies
Taylor Swift: Concerts, televised specials, movie(s?), lunch boxes, awards shows, etc.

10. Capturing Value – Films and More The movie is rarely a one off project.
Multiple release windows
A form of price discrimination
Market segmentation
(Can this be applied to the music business?)
The movie as product line
What is the source of “value” generated by a movie?
Successful strategies
Product line
Batman: print media, movies, home video, domestic TV, foreign TV, licensing and merchandise, Broadway show
Harry Potter: Books  movies  infinite line of products
Fast and Furious: Videoames, toys and models, movies
Taylor Swift: Concerts, televised specials, movie(s?), lunch boxes, awards shows, etc.

11. Best Selling Movie By Year Every one is a franchise or sequel

12. Franchise Includes Movies This does not include licensed merchandise.
Batman
Franchise Includes Movies
This does not include licensed merchandise.

14. Fast and Furious Movie Franchise

15. Movie as Franchise: Capturing All the Value Out to the Margin
Movie  Licensed Merchandise
The Mummy Returns  “Action Figure” + toys + Happy Meal + …
Product  Movie
Pirates of the Caribbean Disney Ride  Movie (2003)  Movie (2006)  Movie (2007)  Movie (2011) …
Movie  Movie:
“When Warner Bros. released “The Matrix,” the studio feared the movie would baffle audiences and bomb. Now it’s hard to think of projects more eagerly anticipated than parts two and three.” (TIME, 4/22/02. Part Three bombed in 2003)
Sequels are among the most successful: Iron Man, etc., Harry Potter
Movie and Movie and Movie …
Fast and Furious. Is this a sequel?
James Bond, Jason Bourne
Shreck
Cartoons
Not a sequence: Defiance video game and Syfy TV series (2013)

16. Movie as Advertising Platform

17. Movie Release Windows First run theatrical: Domestic  International
Home video: Domestic  International
Cable: Domestic  International
U.S. network TV
U.S. syndication TV
Foreign syndication TV
THE LORD OF THE RINGS
…Peter Jackson made three films at once and then sold them all to the same fans again and again and again. The theatrical releases, in consecutive years, turned out to be teasers for the DVD release.
(A.O.Scott, NYT Magazine,.)

18. March – May, 2014

19. Fame is Fleeting Shortened Movie Runs – Why?
Demand driven – short lived demand
Supply effects – studio strategy
Implications for Production
Implications for Profits and Revenues
Costs and Benefits for Studios and for Exhibitors

20. Dropoff in 2nd Week Revenues of the Number one Movie, by Week
Summer 1991
Summer 2001
FX %
What about Bob? %
Backdraft -28%
City Slickers -13%
Robin Hood -29%
Naked Gun %
Terminator %
Hot Shots! -26%
The Mummy Returns -50%
Shrek even
Pearl Harbor -50%
Swordfish -30%
Lara Croft -59%
Fast and Furious -50%
A.I %
Cats and Dogs %
Legally Blonde %
Jurassic Park III %
Planet of the Apes -60%

21. Summer October 2009
Source:

22. The initial run can be misleading
LOS ANGELES — In early April, as Lionsgate prepared to release “Kick-Ass,” the movie capital buzzed that the film looked to be a smash hit. Lionsgate had acquired it for just $15 million, and surveys that track audience interest projected a $30 million opening weekend. The movie, directed by Matthew Vaughn, instead opened with $19.8 million, and the chatter, fueled by the blogosphere, abruptly turned negative. Misfire! Bomb! Flop!
As it turns out, “Kick-Ass” is living up to its title. The picture, about a teenager who tries to become a superhero, went on to generate about $97 million in ticket sales and is on track to sell over two million copies on DVD and digital download services. Still to come: lucrative sales to TV channels around the world.

23. The first run does matter as part of the promotion of the enterprise
Benedetta Lucini, “Analyzing the ROI of Independently Financed Films,” Stern SoB, MBA.

24. Book Release Windows

25. Shorter Release Windows

26. Video on Demand May Change the Release Window Strategy
Useful Distinctions
YouTube
Television – Hulu
Netflix
Cable Operators’ Movie Distribution
Pricing
Advertising model – in stream
Subscription model
Mobile Video… (Important change. Blurs the distinction) 26

27. Changed Market – 40% Decline in Home Entertainment Revenue

30. Entertainment and Media: Markets and Economics
Movie distributors and book publishers time releases into different windows to exploit different market segments.