Tag Archives: Entertainment/Culture

Problems Facing the Film Industry

Red Curtain
Red Curtain by djnorway http://www.sxc.hu/photo/1374248

There is a lot of gnashing of teeth about the future of the film industry given that “Between 2007 and 2011, pre-tax profits of the five studios controlled by large media conglomerates fell by around 40%”.

The business of film making (as opposed to TV) will change. The Internet has disrupted theatrical distribution, home video and home entertainment.

Hollywood has responded to the threat to their business model by pursuing tentpole releases. Big event movies that prop up the bottom line the way a pole props up a tent at the circus. That’s still a broken business model which sees the studios make fewer movies which each carry a greater share of the risk. $300 million USD to make and another $50-100 million to market. Now in the world on mega corporations those numbers are not significant.

The problem is that the large media conglomerates are too big. If they had a movie that cost $25 million to make and market, and it made $75 million that’s a great result. But it doesn’t mean a drop in the ocean for conglomerates that big.

In the long run I expect the film production business will be a big but not huge business. Mature competitive markets eventually generate zero abnormal profits. In the long run mature markets can be measured by return on equity (ROE pr ROCE). I don’t see something as bespoke as film production becoming that reliable. Television drama with it’s focus on reaching 100 episodes can produce a product range over 3 or 4 years.

Public ownership of movie production companies is not a good fit for the model. Smaller companies and smaller movies will always find a way to make money in a smaller market.

Interestingly, are there any publicly listed Art production companies? No, but that doesn’t stop artists from creating work, and the most successful of them making a very good living at it.

Red Bull Mobile Network Australia

Red Bull Mobile AustraliaRed Bull has been busy extending their brand into the GSM mobile space globally. The next step on the path to world domination is Australia.

Technically they are mobile virtual network operator (MVNO) just like Virgin Mobile, which means they sell access to an existing network with their own branding and price structure.

Virgin Mobile would be the only other similar brand in that space in Australia. I think it’s a move worth making. The costs of becoming a MVNO are relatively low for a global brand but they get instant brand recognition in the new market. This is a great brand extension policy.

Red Bull have added to that by using social media to get the word out. I’ve got  a free SIM card from Red Bull Australia because I am an account at Klout. If you are quick and in Australia you can also get a free Red Bull Australia Mobile SIM.

The customer acquisition cost of this strategy has got to be ridiculously cheap. Compare what it would cost You&Me Inc to attract young brand aware consumers to a new mobile phone network.

If that link worked for you, and you got a free SIM, please comment below, and a like, +1 or other thanks would be appreciated.

Update 20 Aug 2011 @13:00:

A third party, Aggregato, will provide retail sales and distribution management and customer service support for Red Bull MOBILE.

Aggregato owns GRL Mobile who are rebranding as Red Bull MOBILE from 7 September according to this news announcement.

That reinforces my point about customer acquisition costs. GRLmobile’s total customer acquisition spend will rise under this deal, but their cost per customer acquisition will go down. Customers don’t have to overcome the “who are they?” question

Red Bull may only be taking a licensing fee for all I know, but given Red Bull Mobile’s international rollout,  it seems like they’ve put some resources behind establishing their brand in the mobile space.