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Drawing from a variety of experts in an industry that has seen major technological advances since the second edition, The Movie Business Book, Third Edition, offers the most comprehensive, authoritative overview of this fascinating, global business. A must-read for industry newcomers, film students and movie buffs, this new edition features key movers and shakers, such as Tom Rothman, chairman of Fox Filmed Entertainment; Michael Grillo, head of Feature Film Production at DreamWorks SKG; Sydney Pollack; Mel Brooks; and many others. A definitive sourcebook, it covers nuts-and-bolts details about financing, revenue streams, marketing, DVDs, globalization, the Internet and new technologies. All of this -- and more -- is detailed in this new edition of the classic Movie Business Book.
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Jason Squire is a former film executive at United Artists, Twentieth Century Fox and Embassy Pictures. He has taught at the University of Southern California since 1988.Excerpt. © Reprinted by permission. All rights reserved.:
by Jason E. Squire
This book is all about the business side of movies. Spawned over a century ago, motion pictures matured in one generation into a complex mixture of art and commerce, capturing the imaginations of worldwide audiences and having a profound impact on behavior, culture, politics and economics.
At its simplest, the feature film is the arranging of light images to win hearts in dark rooms. At its most complex, it is a massive venture of global commerce, a vast creative enterprise requiring the logistical discipline of the military, the financial forecasting of the Federal Reserve, and the gambling instinct of wildcat oil drillers, all harnessed in private hands on behalf of the telling of a story. The profit motive is at work here, but the formula that attracts audiences is as speculative, uncertain and elusive as can be.
Movies as Product
To the new reader, a warm welcome.
To the returning reader, there have been profound changes in the movie business since our last time together.
The theatrical market has shifted from a profit center to a loss leader.
The industry is in transition from analog to digital. This changeover is complete in postproduction. A growing number of movies are also being shot digitally, and digital projection can be found in major cities while distributors and theatre owners continue to debate its value.
The biggest change since our last visit is that movies are no longer stand-alone amusements. Rather, they are an important piece in a complex mosaic of marketing and reincarnations into a variety of products, each using the movie's title or brand. The ideal product mix based on one project would flow through various divisions of one of the global entertainment companies that today control the studios: through movies, home video, television, books, music, video games, toys and other consumer products. On a more realistic basis, every movie is a prototype that of course does not lend itself to such crossover. But that won't stop efforts at synergy, which will succeed or fail due to the whims of the marketplace. At its core, any movie investment is speculative, high risk, and at the mercy of customers.
The simple choice of going to the movies in theatres faces more competition than ever, because it involves leaving home. Think about all the alternative recreational choices out of the house: sports (playing or watching), exercise, concerts, shopping, dining, museums, sightseeing or just plain lounging, among others. Now consider all the choices that keep customers at home: the Internet (for surfing, chatting or commerce), video games, studying (for business or school), eating, watching TV or DVDs, reading, listening to music or just "a quiet evening at home." With these competing pressures in place when targeted audience members decide what to do some evening, it's no wonder that movie marketing costs -- spent to induce one specific choice out of a cluttered marketplace -- are growing exponentially.
A related issue is time. Time is finite, but the alternatives to fill it are infinite. A movie usually takes two hours of one's time. With competing recreational choices inside or outside the home often delivering similar value in less time (or in smaller, more controllable portions), movies are under more pressure than ever before.
A motion picture is an extremely perishable commodity. It lives and has value as long as it is on people's minds or in their frame of reference. The public's perception of an average movie's value decreases as access to it increases and as it ages. A successful movie can remain in theatrical release for six months or more, while a failure can be gone from theatre screens in two weekends, as an impatient audience goes on to the "next big thing." After the theatrical run, movies are sold as home videos, producing revenue that can meet or exceed their box office grosses. Later, movies enjoy rejuvenated value each time they are sold in libraries of product, reaching new audiences in other countries.
There is worldwide interest in opening weekend box office grosses, much like the tracking of a weekly horse race. (What product outside popular culture trumpets weekly sales figures to the press?) But now and then, savvy reporters claim some numbers are bogus. Moviegoers enjoy following these races because of their emotional investment in movies they've seen and because of the high stakes involved. Industry trackers pay special attention to the second weekend's percent change and to ultimate box office performance because those numbers might foreshadow the accumulated commercial value of each title. In addition, some after-theatrical deals, such as for television licensing, are often pegged at a percentage of box office gross.
The life cycle of a motion picture consists of orderly revenue streams built into calculated time frames or "windows." Theatrical exhibition is first, but not necessarily the most lucrative; home video has that honor for the most popular titles. The theatrical marketing campaign is expensive because it conveys a movie's image, which becomes linked to the product throughout its exploitable life around the world. In the United States, early weeks of a theatrical run will call for an after-overhead formula of some 90% of box office gross returned to the distributor, while later weeks, if the picture has staying power ("legs"), will find the exhibitor receiving a growing share of revenue as the product ages.
The next major revenue stream, some four to six months after theatrical, is home video, once the movie has disappeared from neighborhood theatres. The distributor's share can be substantial in this market, and the product can enjoy a long shelf life, having made the leap from theatres into the home, from being licensed by distributors and experienced by customers to being sold by distributors and owned by customers.
The picture ages further before it is available to the millions of subscribers of home pay-cable or satellite services, the next big revenue stream. Revenue to the distributor from this market is based on a formula geared to subscriber fees.
Another contractual time frame generally passes before the movie can be shown on network broadcast television; or on a basic cable network; or on an ad hoc broadcast network of TV stations created to show a library of, say, one studio's recent films; or in a group of films sold in a TV syndication package to a syndicate of local stations for a certain number of runs over a period of years. The picture has decreased in value because of its exposure, and revenue is turned over to the copyright owners based on negotiated payments triggered by each run.
Pictures originating as made-for-network (broadcast, cable or pay) television movies are subsequently licensed via domestic television syndication as further product for local TV station libraries, and are also sold, usually in packages, to different countries. Movies originating as made-for-video product premiere in video stores and can enjoy lucrative life spans in subsequent revenue streams all over the world.
Markets outside the United States follow this same general pattern; the global entertainment business is based on the American model. Each country's rollout is dictated by territorial owners of distribution rights and the sophistication of home technology. Naturally, some pictures will experiment with the pattern, shifting sequence because of specific deals, or perhaps returning to certain formats as revivals because of their uniqueness, depending on what the market will bear. For instance, in the U.S., The Rocky Horror Picture Show pioneered the concept of weekend midnight showings and still enjoys a cult following; and a version of A Christmas Carol can always be found on a local TV station around that holiday.
The Movie Business
Like any business, the motion picture business exists to make money. Comparisons can be loosely made to other industries: production encompasses research, development and manufacturing; while distribution can be compared to wholesaling and exhibition to retailing. But there the comparisons end, because the public's demand and use of entertainment products such as motion pictures are unlike the demand and use of any other product. In no other business is a single product fully created at an investment of tens of millions of dollars, with no real assurance that the public will buy it. In no other business does the public "use" the product and then take away with them (as Samuel Marx observed in his book Mayer and Thalberg) merely the memory of it. In the truest sense, it's an industry based on dreams, and the service that is rendered is entertainment, leaving -- at its best -- an afterglow of warm emotions and recollections.
A note about "business." The very word puts some people off. When applied to movies, it once conjured up conflicts pitting West Coast against East Coast, the creative community against the business community, art against commerce. That's all changed. The motion picture professional learns early to mix the creative and business sense out of self-defense.
There continues to be no magic formula for a commercial movie, but patterns emerge, emulating prior successes. Buzzwords come and go. When franchises are in vogue, an increasing number of branded sequels results, all containing a form of insurance that audiences will want to return to the familiar. Branding is relatively new to the movie business, derived from the consumer products industry, and box office results encourage the trend. But there are still edgy movies being made, especially in the independent arena: The Blair Witch Project, Memento. And in the studio arena: Three Kings, Adaptation.
In earlier days, as the industry grew, studios were vertically integrated production/distribution/exhibition factories. By the late 1940s, the U.S. Department of Justice concluded that this structure was a monopolistic restraint of trade, and forced divo...
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