Problems Facing the Film Industry

Red Curtain
Red Curtain by djnorway

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.

One response to “Problems Facing the Film Industry”

  1. In contribution, The devaluation of film as a product is alsp a challenge here because Film is becoming less ‘valuable’ as streaming content on mass erodes the pricing model of physical items like DVD and Bluray. With current technologies, filmmakers are able to get their films out on VOD faster to their audience but there’s a catch : People are paying less per stream than they would a physical product. As VOD ‘cheapens’ the physical product , this is the biggest challenge and problem that has to be dealt with, and it’s unavoidable.

    If the price of a film falls too low, then the film producers, set designers, film directors, editors and so on, will all feel the pinch. Even a film financier will be left with smaller returns if the numbers are too low and that will have a direct impact on film production as we know it. It’s not just film crews that will feel the pain either. PR companies, distributors, actors, caterers, hotels, travel companies and so on will feel the knock-on effect.
    (Leonard Folarin, 200L Dept of Mass Communication, Caleb university. imota, Lagos)

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