1. Chapter 8 The Entertainment Industry

2. Chapter Overview Lesson 8.1 - Entertainment Profits Lesson 8.2 - Distribution of Entertainment Lesson 8.3 - Marketing Music and Theater Lesson 8.4 - Awards and Annual Events Lesson 8.5 - Entertainment Marketing Careers

3. Lesson 8.1 Entertainment Profits

4. 8.1 – Goals / “I can…” Explain financial strategies in the motion picture industry Calculate film revenue, and discuss the importance of foreign markets for movies

5. Recent entertainment Events! Can we survive the success of “Here Comes Honey Boo Boo? “ Toddlers and Tiaras spin off drawing 2.3 million viewers and climbing Holiday specials ranged from 3.4 million (Halloween) to 2. 19M for Thanksgiving Duck Dynasty is A&E’s highest rated show

6. At the Movies Box Office for Summer 2012 disappointing. Slightly down revenues of $4.4 billion Avengers and The Dark Knight the big winners Blockbusters fizzled Men in Black 3 Battleship The Amazing Spiderman Surprises TED Magic Mike Flat Out Duds Dark Shadows Rock of Ages

7. The Successes The Avengers $1.4 billion global take $203 million open (best ever!) Disney’s $4 billion purchase of Marvel pays off big! Sequel to debut May 2015 Helps ease sting of John Carter The Dark Knight opens with $160 million (best ever non-3D). Total b.o. tops $1.08 billion ($250M)

8. Lessons from summer The “Star” system is tarnished … Tom Cruise, Adam Sandler, Will Smith all had disappointments; affordable stars like Tom Hardy were breakouts Movies are far too expensive - $225M for MIB3 Seth Grahame-Smith tanked! Wrote Dark Shadows and Abraham Lincoln: Vampire Hunter

9. Lessons From Summer Indie films are doing just fine! The Best Exotic Hotel Marigold – surprise hit Never bet against animation Frozen, Brave, Ice Age 4 and Madagascar 3 all did well

10. The Profit Makers Only 2 of the 6 major Hollywood studios turned profits in 1998, despite record audiences. Paramount Pictures (Viacom, Inc.) and 20 th Century Fox Film Corporation were successful thanks to Titanic ($1.8B tickets) Others suffered b/c of high cost of the production and distribution

11. The Big Screen Movies are made with the demographics of a particular audience in mind. The time of year the movie comes out influences how much it will make at the box-office Movie preview the release of a movie to a limited number of theaters prior to its official release Art-house movies outside the mainstream of popular subjects often made by independent filmmakers

12. ConglomerateParent division Major studio subsidiaryArthouse/"indie" distribution subsidiaries Genre/B movieB movie Distribution subsidiaries Other divisions and brandsU.S./Can. market share (2010) [1] [1] Time Warner Bros. Entertainme nt Warner Bros. Pictures New Line CinemaNew Line Cinema, HBO Films, Castle Rock Entertainment, Turner Entertainment, Warner Bros. AnimationHBO FilmsCastle Rock EntertainmentTurner EntertainmentWarner Bros. Animation 18.0% 1 1 Viacom Paramount Motion Pictures Group Paramount Pictures Paramount Vantage Insurge Pictures Nickelodeon MoviesNickelodeon Movies, MTV FilmsMTV Films 16.8% 2 2 News Corporation Fox Entertainme nt Group 20th Century Fox Fox Searchlight Pictures 20th Century Fox Animation20th Century Fox Animation, Fox Faith, Blue Sky Studios, New Regency Productions (20% equity), Fox Animation Studios Fox FaithBlue Sky StudiosNew Regency ProductionsFox Animation Studios 14.8% 3 3 The Walt Disney Company Walt Disney Motion Pictur es Group Walt Disney PicturesPictures/Touchstone Pictures (unified business with separate brands)Touchstone Pictures Hollywood Pictures PixarPixar, Walt Disney Animation Studios, Marvel Studios, DisneynatureWalt Disney Animation StudiosMarvel Studios Disneynature 14.3% 4 4 Sony Corporation of America Sony Pictur es Entertainme nt Columbia Pictures Sony Pictures Classics Screen Gems TriStar PicturesTriStar Pictures, Sony Pictures Animation, Destination Films, Triumph Films, Stage 6 Films, Affirm FilmsSony Pictures Animation Destination Films Triumph FilmsStage 6 FilmsAffirm Films 12.8% 5 5 ComcastComcast/ General Electric NBCUnivers al Universal PicturesFocus Features Universal Animation StudiosUniversal Animation Studios, Illumination Entertainment, Working Title Films Illumination EntertainmentWorking Title Films 9.2% 6 6

13. Life Cycle of the Movie Product Theatrical exhibition – First Tier Up to 90% gross to distributor (Ex: The Grey) 40 - 60% goes from $1.50 theatres, drive ins 2-4 months later – DVD rentals and sales – Second Tier (Ex: DRIVE) Share based on a % of sales or purchase at “for rent” price Home TV Pay Stations (HBO, Showtime, etc.) (9-12 months post b.o.) – Third Tier (Ex: Black Swan) Based on a fee of % of subscriber fees Network Television Viewing – Fourth Tier (2-3 years post b.o.) Negotiated payouts triggered by each run Made for TV Movies can be sold to local affiliates or overseas markets for additional revenue Exceptions – Rocky Horror and weekends

14. 2x2 Marketing Analysis of a Film Product Product Cast – Dark Shadows Special Effects – Avatar Soundtrack – Saturday Night Fever, The Matrix, O Bro Where art Thou? Plot – Sixth Sense, Fight Club, Donnie Darko, Planet of the Apes Cinematography – Inception, Hugo, The Aviator Price Cost of Production – Avengers ($220M) b.o. $1.52B Napoleon Dynamite ($400k) Marketing Expenses – Independence Day Box Office to Date Avatar ($2.78B); Napoleon Dynamite ($44.5M) Place Timing of release – Scorpion King, The Avengers; Battleship Wide (Dark Knight Rises) vs. Tiered Release (Silver Linings Playbook) Rating of the Film – Beverly Hills Cop Poor – South Park (R), Dinosaur(PG) Promotion PR – Beautiful Mind Event marketing – Days of Thunder Promotions – Finding Nemo, Star Wars Ads and Trailers – Independence Day, The Dark Knight Merchandising – Frozen

15. Cost Cutting Strategies 2 of the biggest expenses for movies: Production costs Distribution costs low budget1 way to cut costs = make a low budget movie. Movie with costs < $250,000 Sundance Film Festival

16. Cost Cutting Strategies Wide Release MoviesCut the # of Wide Release Movies Released in more than 2,000 theaters at 1 time Low budget movies capitalize on the promotional budget of major movies by using similar themes in the title The Blair Witch Project

17. Profit and Opportunity Several elements are looked at: Ration of tickets sold to cost of production $$ from licensed merchandise, soundtracks, global releases, & domestic releases Blair Witch Project cost = $50,000 − It grossed $36m the first 3 weeks out

18. Profit and Opportunity Profit depends largely on the popularity of the film overseas International release can increase receipts by 50 to 100% Harry Potter & the Sorcerer’s Stone Domestic = $317m in ticket sales Overseas = $658m in ticket sales Harry Potter & the Chamber of Secrets Domestic = $262m in ticket sales Overseas = $604m in ticket sales Box-offices sales for 2013 Problems in China 1.5 billion people

19. Star Wars Saga Economic Impact Star Wars: Episode IV - A New Hope 1977 Budget $13M US Gross $461M WW Gross $798M Star Wars: Episode V - The Empire Strikes Back 1980 Budget $18M US Gross $290M WW $534M Star Wars: Episode VI - Return of the Jedi 1983 Budget $32.5M US Gross $309M WW Gross $573M Star Wars: Episode I - The Phantom Menace 1999 Budget $115M US Gross $431M WW Gross $922M − Rerelease in February 2012 yielded another $40M Star Wars: Episode II - Attack of the Clones 2002 Budget $115M US Gross $311M WW Gross $648M Star Wars: Episode III - Revenge of the Sith 2005 Budget $113M US Gross $380M WW Gross $848M Total Budget $406M US Gross $2.18B WW Gross $4.32B

20. Ancillary Revenues from Star Wars Soundtrack netted 2 top ten radio play hits, the original theme and the Cantina Band song. Both the Star Wars and The Phantom Menace soundtracks have been certified platinum by the RIAA. Attack of the Clones and Empire Strikes Back are certified gold by the RIAA. Over 100 video games spurred from both film material and the Expanded Universe Games released for almost all platforms including Sega, PS3, Xbox 360, Nintendo, Wii

21. Star Wars – the Bottom Line Initially released on May 25, 1977 Re-released on 7/21/78, 8/15/79, 4/10/81, 8/13/82 and 1/31/97 Ad budget of $4 million Gross receipts of $798M worldwide Rental $270.92M DVD Box set - $100M first day Blue Ray release of Star Wars: The Complete Saga set Blueray record $84M week 1 ($140 set). 515,000 copies in North America U.S. TV rights - $11M Spike TV 2008-13 Series has grossed over $1.8B (6 films) vs. James Bond (21 films) $1,272B and Harry Potter 1,119.0B (4 films)

22. Star Wars – Attack of the Toys! In 1977 movie licensing was hardly a business No tie-in toys No fast food promotions Star Wars series generated $10.5B in merchandise sales 400 licensing agreements worldwide granted for Revenge of the Sith alone Merchandise sales to date are 3X box office receipts of the movie franchise Studios generally make 10-12% on licensing; Lucas negotiates even better %’s

23. Soundtrack Composed by John Williams (former maestro of the Boston Pops) Composed all 6 Star Wars films Nominated for 45 Oscars; 5 have won including Star Wars: A New Hope Revived grand symphonic scores in late 1970’s Used technique called “leitmotif” in which a melodic cell signifies a character, place or mood

24. Soundtrack Research shows that consumers that of those willing purchase soundtracks, 50% do so within 1 week of seeing the film Main theme only used for title crawl in subsequent Star Wars movies Walt Disney is the only individual to have more academy award nominations than John Williams

25. Fan Involvement Multiple Star Wars fan sitesMultiple Star Wars fan sites www.rebelscum.comwww.rebelscum.comwww.rebelscum.com News on Star Wars collectiblesNews on Star Wars collectibles www.theforce.netwww.theforce.netwww.theforce.net

26. Revenues First 5 films $5.7 billion $10.5 billion in toys and merchandise $4.3B in DVDs, VHS and video games (video games ongoing as are releases in 3D and Blueray) TOTAL REVENUE $20 billion +

27. Related Effects of Star Wars Solidified the publishing offshoot proving that orchestral movie scores could hit the top of the charts and pop scores would soon top the day Examples: Saturday Night Fever, Ghost, Batman

28. Internet Entertainment Web based companies that markets sports info, interactive games, tournaments, chat rooms and sports- related merchandise online E-commerce: selling merchandise on the Internet Internet is becoming most valuable place to advertise

29. New ways to make $$ Theaters aim for 3D sports Boston Red Sox World Series run in 2004 Celebration Cinemas showing U of M play in the Sugar Bowl

30. Cultural Profit Opportunities criticalWorldwide distribution revenue is critical Fox sold nearly $2 B in movie ticket sales outside the U.S. 1998Fox sold nearly $2 B in movie ticket sales outside the U.S. 1998 Most films generate less than 25% of their final income from domestic ticket sales alone

31. Problems on the horizon? Ticket sales were down $½ billion from 2010 to 2011. WHY???

32. Lesson 8.2 Distribution of Entertainment

33. 8.2 – Goals / “I can…”  Understand the different kinds of entertainment distribution  Discuss promotional strategies for motion pictures

34. Major Risk  Disney took a MAJOR $$ risk when they filmed 2 sequels back-to-back Sequels to Pirates of the CaribbeanSequels to Pirates of the Caribbean  Did this in hopes of saving $$  Many delays StormsStorms ExhaustionExhaustion PromotingPromoting  $450m estimated cost of both movies

35. Ways to Distribute  Traditional T.V. networks  Cable  Satellite  Internet

36. See It At Home  Videos sold at mass market retailers Wal-Mart & Best Buy  Stimulate sales in music and video specialty stores through Point-of- Purchase (POP) displays  Movies on DVD, stream online, Netflix

37. Why are DVD Sales Hurting?  Recession – yet rental revenue virtually same over last year  Content and Quality of films offered Digital DownloadsDigital Downloads  Transition to High Def – Blue Ray For the first time since 2002 – more consumers went to the theater than rented or purchased DVDs (and box office not great … more $, less people!)For the first time since 2002 – more consumers went to the theater than rented or purchased DVDs (and box office not great … more $, less people!)

38. Cable Mania Initially, there were three TV networks. Initially, there were three TV networks. ABC ABC NBC NBC CBS CBS Now there are 100s (maybe 1,000s) Now there are 100s (maybe 1,000s) Expanding to podcasts Expanding to podcasts a way of distributing multimedia files over the Internet for playback on computers, iPods, cell phones, and other mobile devices a way of distributing multimedia files over the Internet for playback on computers, iPods, cell phones, and other mobile devices

39. Cable Mania  # of cable channels has increased  114.9M homes have tvs  # of houses that are cable ready – 104M  # of houses with digital cable – 50.9M  HDTVs  Monthly fee  New cable channels target specific demographic markets  80% of American homes had cable hook-up

40. Satellite Television  Allows rural areas to receive stations  Must buy a dish ($130)  Subscribe to monthly service  Offering more than 200 channels  32.7M homes in 2010

41. Effective Examples  Blair Witch Project Developed web page that made it look like a real news storyDeveloped web page that made it look like a real news story Added short, intriguing trailersAdded short, intriguing trailers Per-screen revenue was over $56,000Per-screen revenue was over $56,000  The Lion King II Bypassed theater release Sold directly o rental and sales of video ($10 mil.)

42. Satellite Radio  Only 3 WorldSpaceWorldSpace  Europe, Africa, Asia, C. & S. America SiriusSirius XMXM  Over 100 channels  Commercial free

43. From Vinyl to iPod  Getting music has changed over the years: Record >> Tape >> CD >> DigitalRecord >> Tape >> CD >> Digital  Early stages of the iPod meant you had to sacrifice quality for quantity 50M ipods were sold in 1 st 4 years50M ipods were sold in 1 st 4 years  The iPod has spurred a new age of music technology

45. The Internet Music Revolution  Major music distributors took major hits due to file-sharing  Where the industry saw this as a major setback, Apple saw it as an enormous opportunity  iTunes was born

46. Lesson 8.3 Marketing Music and Theater

47. Marketing Music & Theatre Goals / “I can….” Goals / “I can….” Understand the distribution of music Understand the distribution of music Discuss the legalities of music distribution Discuss the legalities of music distribution Explain kinds of theater promotion Explain kinds of theater promotion

48. RIAA Recording Industry Association of America Recording Industry Association of America Concerned with copyright violation Concerned with copyright violation Trying to fix the problem of falling revenues Trying to fix the problem of falling revenues What could be some of the reasons? What could be some of the reasons?

49. Distributing Music Many colleges offer students free online music through LEGAL music download services Many colleges offer students free online music through LEGAL music download services Agreements with providers Agreements with providers Done to combat illegal file sharing Done to combat illegal file sharing Sometimes caused college networks to crash Sometimes caused college networks to crash Helps universities recover $$ Helps universities recover $$ $75,000 per year for Vanderbilt Univ. $75,000 per year for Vanderbilt Univ. Pros & Cons Pros & Cons

50. Distributing Music Concerts Concerts “Wildcat Tours” “Wildcat Tours” Tours that cut out the booking agent and dealt with the promoter & manager Tours that cut out the booking agent and dealt with the promoter & manager Robert F.X. Sillerman Robert F.X. Sillerman Owner of SFX Owner of SFX Now owned by ClearChannel Comm. Now owned by ClearChannel Comm. Produces 98% of concerts in U.S. Produces 98% of concerts in U.S. MP3 MP3 Encoding & format that reduces data required to represent audio pirating of music for free, illegally from the Internet

51. Today’s Top Music Hip-hop sales inc. Hip-hop sales inc. Marketing Rap Marketing Rap Sampling – inclusion on a CD of excerpts Sampling – inclusion on a CD of excerpts Many music label executives use intuition to decide what is marketable Many music label executives use intuition to decide what is marketable Mainstream Rap Mainstream Rap Madison Ave in NY is home Singers and dancers featured in TV ads. Changing to more acceptable messages

52. Promoting Theater Broadway uses: billboards, radio, upscale theater magazines, and other publications Broadway uses: billboards, radio, upscale theater magazines, and other publications Word-of-mouth is the major source of promotion Word-of-mouth is the major source of promotion Fascination with the lights and the people Fascination with the lights and the people Rosie O’Donnell is credited with increasing sales Rosie O’Donnell is credited with increasing sales Metropolitan Opera of New York (The Met) Metropolitan Opera of New York (The Met) Duke University course Gain knowledge and appreciation for the arts

53. Lesson 8.4 Awards and Annual Events

54. 8.4 - Annual Awards & Events Goals / “I can….” Goals / “I can….” Explain the promotional value of entertainment awards Explain the promotional value of entertainment awards Discuss ways in which entertainment is distributed Discuss ways in which entertainment is distributed

55. The Oscars The Oscars Most famous and prestigious award Most famous and prestigious award Given by: Academy of Motion Picture Arts and Sciences Given by: Academy of Motion Picture Arts and Sciences 5,800 members determine each award 5,800 members determine each award Nomination is a promotional bonanza for those involved Nomination is a promotional bonanza for those involved No more than 5 nominations are made for each category No more than 5 nominations are made for each category Winners featured on magazine covers, newspapers Winners featured on magazine covers, newspapers Winning an award and getting a nomination have promotional value money cannot buy Winning an award and getting a nomination have promotional value money cannot buy Have 2 nd highest viewership after the Super Bowl Have 2 nd highest viewership after the Super Bowl Sunday, February 26 th on ABC Sunday, February 26 th on ABC In 2006 ABC charged $1.5M per 30 second commercial In 2006 ABC charged $1.5M per 30 second commercial

56. The Oscars Where do I watch? Where do I watch? ABC has held the rights to show the Oscars for many years ABC has held the rights to show the Oscars for many years Moved from Monday night to Sunday night Moved from Monday night to Sunday night Why? Why? Winning is big $$$$ Winning is big $$$$ Best Picture is the most prestigious award Best Picture is the most prestigious award Winner likely to bring in an extra $100M in ticket sales plus prestigious publicity Winner likely to bring in an extra $100M in ticket sales plus prestigious publicity

57. The Grammys National Academy of Recording Arts and Sciences (NARS) National Academy of Recording Arts and Sciences (NARS) 31 Fields 31 Fields 108 subcategories 108 subcategories Winners selected by vote of the committee members Winners selected by vote of the committee members Brings a lot of attention Brings a lot of attention Does not guarantee success or sales Does not guarantee success or sales New artist categories are sometimes never heard from again Examples????

58. The Emmys 12K member organization 12K member organization Academy of Television Arts and Sciences Academy of Television Arts and Sciences Presents primetime, daytime, sports programming, newscasts, & documentaries Winning shows or stars can increase the viewing audience Winning shows or stars can increase the viewing audience

59. The Tonys Named after Antoinette Perry Named after Antoinette Perry Served as head of the Board of the American Theatre Wing Served as head of the Board of the American Theatre Wing Given to professionals in theater for distinguished achievement Given to professionals in theater for distinguished achievement More of a special-interest award More of a special-interest award Ratings up when Rosie O’Donnell was host Ratings up when Rosie O’Donnell was host

60. A few ?s What award would you receive if you won the Album of the Year? What award would you receive if you won the Album of the Year? What award would you receive if you won for best Lead Actor / Actress in a Drama? What award would you receive if you won for best Lead Actor / Actress in a Drama?

61. Lesson 8.5 Entertainment Marketing Careers

62. Getting There From Here Marketing You Marketing You You are the major product You are the major product Know what you want to do and what it takes to get the job Know what you want to do and what it takes to get the job Gather info on the job to make a decision Gather info on the job to make a decision Know what is required Know what is required How to Prepare How to Prepare Conduct research Sources of info Internet People you know Company reports Business directories College placement offices Recent news articles

63. Marketing Jobs Opportunities for marketers, advertisers, and public relations specialists will be among the fastest growing in the nation through 2006 Opportunities for marketers, advertisers, and public relations specialists will be among the fastest growing in the nation through 2006 # of consumers rises – the # of artists, performers, and staged performances will increase # of consumers rises – the # of artists, performers, and staged performances will increase General background in these fields can urn into a focus on entertainment General background in these fields can urn into a focus on entertainment

64. Marketing Relations Specialist Build and maintain positive relationships between their employer and the public Build and maintain positive relationships between their employer and the public Looks out for the best interests of another Looks out for the best interests of another Keep the media and consumers aware of the company or person they represent Keep the media and consumers aware of the company or person they represent More opportunities in larger cities More opportunities in larger cities College degree preferred combined with experience (Internship) College degree preferred combined with experience (Internship)

65. Marketing/Advertising Mgrs Intense competition Intense competition Potential to earn high salaries Potential to earn high salaries Long hours Long hours Jobs dictated by consumer interest at the time (flexible) Jobs dictated by consumer interest at the time (flexible) Responsibilities Responsibilities Strategic planning, sales, advertising, pricing, product development

66. Skill Requirements Math, communication, interpersonal skills Math, communication, interpersonal skills Ability to communicate persuasively orally and in writing Ability to communicate persuasively orally and in writing Ability to work on a team Ability to work on a team Creativity Creativity Initiative Initiative Self-confidence Self-confidence Maturity Maturity Flexibility Flexibility