The Movie Entertainment Industry - Research Paper Example

?THE MOVIE ENTERTIANMENT INDUSTRY (THE CURRENT ISSUES) The commercialization of leisure in modern America has been brought about by the steep rise ofincomes, effectively establishing entertainment as a major industry today. For Hollywood, this phenomenon is both good and bad news. It is, certainly, a benefit since the movie audience has expanded. On the other hand, film has to face an increasing competition from other leisure activities as Americans became disenchanted with the type of passive entertainment. So far, Hollywood has been successful in gaining competitive advantage. The strategy is quite simple: movies became more larger than life, splashier and are made to impress in order to attract the public who have become more sophisticated in their tastes. This has become the blockbuster formula that has worked for major studios. By 2002 the annual ticket sales peaked at $1.6 billion.1 After this period, however, one can no longer say the same. In 2008, the figure dropped to $1.3 billion while the audience registered a constant decline in size across all segments of the movie-going public except teenage boys.2 Hollywood’s formula for blockbuster films - one that has so far succeeded in impressing the audience and keep them coming back - relies much on technology because it is crucial in providing flashier visual effects, which has been proven to appeal to a broader audience. Background According to Vanhala (2011), the average production cost of a movie from a major studio is $55 million with an additional $27 million to advertise and market, a total of almost a hundred million per film.3 Big productions that almost often assure box-office success could cost a studio up to 300 million dollars such as with the cases of Spiderman 3 and Pirates of the Caribbean 3. The figures are humungous and one could often hear producers lament about the viability of moviemaking and of the way films lose even with a decent performance at the box office. The complaint is not entirely unfounded. A detailed explanation has been offered by Vanhala as it was suggested that domestic box office, home video, DVD, television and cable revenues often cannot collectively cover the invested money in a film unless it is a major blockbuster.4 Pricewaterhouse-Coopers reported that the major studios’ revenues can be broken down as follows: 1) theatrical box office 24.6 percent; 2) television 28.8 percent; and 3) Home Video 46.6 percent.5 There are those who would argue that other means of revenues could make up for box office losses but this is not always the case. According to the Motion Pictures Association of America “most films never recoup their initial investment.”6 A case in point is Prince’s (2002) discussion of movie revenue in which he stressed: There is little home video revenue left over to pay back the substantial negative cost still on the books from a theatrical flop. Home video success in such a case is significant for the company’s cash flow and especially for its home video profit center, but profit participants due a percentage on the theatrical flop are unlikely to be close to paydirt.7 It is not surprising, hence, when both academics and economists brand moviemaking in American as a risky affair. The dynamics by which film financing are undertaken with their complex and elaborate risk-sharing schemes underscore this point. Today, films are no longer produced by one studio or entity. Investors are pooled, which include corporate entities and other third-parties such as A-list actors, directors and producers.8 Out of all of the dismal statistics cited, however, it is interesting to note that Hollywood still makes about 400-600 films each year.9 The answer to this puzzle is crucial in identifying the effect of technology in movie-making. Understanding them can help outline the importance of technology in American filmmaking today. There are two identified drivers to the American film industry’s profitability: blockbuster films and the international market. These two areas proved to be not just the savior of the film industry but its ticket to revenues and further expansion. The Box Office Effect As has been cited elsewhere in this paper, the theatrical exhibitions alone cannot entirely account for a film’s profitability. Take the case of movie Batman as an example. Jack Nicholson’s sliding 15-20-percent gross participation in the film, the one directed by Tim Burton, accounted for over $50 million – which, after deductions for the distribution fee and expenses, left the top-grossing blockbuster virtually on a break-even profit.10 Most blockbuster films, however, are extremely profitable to the point that they cover the losses incurred by other films of a particular studio, say, in a given year. However, a box-office success can spell a lot of difference for a particular movie even if the revenue collected did not sufficiently cover the initial investment shelled. More than the box office receipts, there is the fact that critics review the film, people talk about it, and the popularity and publications created about it certainly raise interest not only in film exhibitions but also in other markets such DVD or home video releases, for instance, achieve financial successes as well.11 Sales and rental rates also rely heavily on the success of the movies in theater – a demonstration of the supply and demand economic principle. All in all, a blockbuster movie can, indeed, impact positively the revenues that are generated by producers. For smaller production outfits, the benefit is astounding. This has been highlighted by Mann (2008), who noted that a high-priced picture that fail in the box office could jeopardize the future of independents filmmakers who lack the financial resources of major film studios.12 The offshoot is that Hollywood film companies often try the strategy of producing formula films – those materials proven to be effective in the theaters. The formula is always punctuated by epic storylines, big stars – big budget. It formed part of what this writer branded as a shock-and-awe approach, a tactic designed to mesmerize and attract the audience so that they are lured away from their other leisure activities. An excellent representation of this model is the movie “Blockbuster” a ridiculously expensive film that “combined big stars like Tom Cruise, Mel Gibson and Harrison Ford with visual spectacle, amazing special effects and fast-paced action.”13 The idea is to appeal to the widest possible public by sacrificing story to accommodate popular stars and/or provide breathtaking visual effects and sounds that capture the experience of fantasy and violence, among other related themes. The X-men film, for instance, did very well in theaters and so did the Spiderman franchise. These films featured big stars and amazing special effects that appropriately fed the audience’s hunger for spectacle and star commodities. Foreign Audience Another important source of revenue for the American film industry is its foreign audience. In a way, a film outfit today resembles the typical bricks and mortar enterprise that operates globally. There is the simple strategy to export the product because the domestic market is no longer enough and viable. Globalization has made it easier to market a film overseas and, indeed, the market is sizable. Describing this development, Vanhala stated: The worldwide demand for films increased at an unprecedented rate, the result of such factors as economic growth in Western Europe, the Pacific Rim, and Latin America… the commercialization of state broadcasting systems, and the development of new distribution technologies. To capitalize on these conditions, Hollywood entered the age of “globalization.”14 Today, the global market for Hollywood films delivers more revenue than the domestic market. It is difficult to quantify the exact figures of the global movie-going public. But just to put the idea into perspective, there is the case of the cinema attendance in the European Union. The share of box office revenue in the region has increased from around 25% in the period of 2003-2005 to over 28% in 2006-2007.15 The extant literature that explores this subject all agree that the foreign market is a saviour for Hollywood and is a major factor for the emergence of formula “blockbuster” films. Technology The previous discussion on blockbuster films and Hollywood’s expansion in the global market underscores the importance of technology. For both of these strategic variables, technology is crucial primarily because it is behind the visual effects development that has characterized many blockbuster films today and, more so in the future. Observers are already one in saying that impressive graphics and visual effects are part of most of the blockbuster movies today. According to Stringer, for instance, this is part of the “must-see” principle at work wherein films are expected to have immediate and massive impact in order to be widely received, effectively making the partnership between blockbuster movies and new audio-visual technologies perfect and close to being an imperative.16 Take the case of Jurassic Park. The film did not boast of an A-list star to carry it through the theaters. However, it featured impressive visual effects that single-handedly propelled the film to profitability. According to Stringer, the visual effects are the raison d’etre of the film; without them, the lack of stars and weak story-line would have seriously jeopardized the success of the film, even with Spielberg directing.17 This is also what happened to the recent Transformers movie, which became the 42nd most successful films of all time, raking in $709 million gross revenue worldwide.18 The special effects involved made up for the relatively low-star status of its actors. A survey of the world’s highest film would also reveal that the top 10 overall is dominated by films that feature advanced special effects: Avatar, Shrek, Star Wars, Pirates of the Caribbean, Toy Story and Spiderman.19 Today, the development of visual enhancing technologies is moving forward rapidly. There was the old 2-D films, then the CGI technology for animated films, DVD, Blu-Ray, and, finally the three-dimensional (3D) movies. 3D Previously, it has been cited that other forms of leisure has directly competed with movies for leisure time among Americans in their affluent lives. With high income, people could afford a diverse range of leisure and could demand more involvement in their leisure diversions. The entertainment industry has had a history of addressing competition head-on. In this case, they found their ammunition in the form of 3D films. 3D technology provides a type of participatory experience that elevates watching movies to a whole new world with its awe-inspiring splendor and breathtaking depictions of scenes, people, period and grandeur. Consider the experience for a moviegoer when, through 3D, he would suddenly found himself at the heart of historical drama where events seemingly happen closer to the spectator, providing an illusory experience of engagement. 3D, wrote Schreer, Kauff and Sikora (2005) “is based on the use of efficient image analysis and synthesis algorithms,” and that “for the future, further stimulation for the 3D market can be expected from two recent initiatives: 1) the foundation of a 3D consortium back in 2003, wherein 200 members worldwide, develop and release 3D Technologies and “discuss issues such as spreading image format appropriate for various applications and I/O devices… and authoring tools for 3D content production.20 In this regard, Elridge’s (2006) insight on how 3D works could enhance further understanding: Through the magic of CinemaScope, you become part of the miracle of The Robe – you share each moment of this wondrous drama – as the imperial might of Rome crashes against the word of God.21 It has been claimed that “the limitless range and incredible clarity of the new process have added the final dimension needed to make you completely a part of every charged moment of a gripping story.22 This is the reason why it is claimed that 3D is the next big thing for Hollywood and for filmmaking in general. Now, the technology is on-screen and yet there are already talks about a cinematic future wherein actors play through holographic images enacting a narrative in people’s very own living room. Dreamworks’ Jeffrey Katzenberg, the visionary behind the highly successful Shrek franchise maintained that 3D is the “single greatest innovation in filmmaking in 70 years and promptly declared that all Dreamworks animation will be made in 3D from 2009.23 Unarguably, the technology is no longer considered a fad but that it is recognized as an important part of a film nowadays and not merely as a separate component. This development is not really surprising. As mentioned earlier, Hollywood formula films are made to impress and take one’s breath away. 3D technology fits perfectly in this tactic and the audience are flocking in theaters to experience the new phenomenon (see table 1). Table 1: 3D Box Office Performance24 The Internet To digress for a bit, it is important to note that Hollywood has so far been following a highly structured approach in its business, which characterizes the so-called exploitation chain – a model that utilizes the vertical economic approach by releasing films theatrically first (and domestically first). It ensures increased revenues and profits through creating a system of windows where film is not released for another stage of marketing until the exploitation in its previous one has been exhausted.25 A movie is first released domestically, and then it is exhibited in foreign territories later on. This allows Hollywood studios to profit from a film to the last cent as it snakes its way through the theaters, home video and, finally, pay-/free TV. Technology, however, is changing this. The principle that has worked in the past that releasing films overseas weeks or months later than its exhibition in the United States in order to benefit from the publicity and buzz generated by such strategy is no longer applicable today. The emergence of the Internet has empowered people from all over the world to access information about a film anytime and anywhere, effectively eroding the traditional marketing tactic. Moreover, e-commerce also allowed people to order movies online. According to McPhail (2010), all major studios have reexamined their global marketing strategies and are now in the process of changing their tactics by enforcing a new policy of rolling out global distribution of major movies within weeks as a direct response to the ever changing environment created by the Internet.26 Conclusion Competition between films or among the major movie studios are not primary concerns in American film industry. First, these major studios dominate the global market, the international film trade is a virtual monopoly by the major American studios. Secondly, a film can target its own core audience or made to cater towards the wider public. The bottom line is that a producer does not worry about threats as a result of direct competition within the industry. If there’s some semblance of competition present, it would have to be between the film industry and the other leisure activities that keep numerous people away from the theaters. Competition may also emerge between a film and those that preceded it. In order to address this type of challenge, Hollywood has followed formula blockbuster movies. There was the need to enlist superstars and, more importantly, provide a high amount of entertainment value through the integration of high-technology visual effects. 3D and how it is being used today demonstrated this argument excellently. Works Cited Cook, David. Lost illusions: American cinema in the shadow of Watergate and Vietnam, 1970-1979. Berkeley: University of California Press, 2002. Elridge, David. Hollywood's history films. New York: I.B. Tauris, 2006. FilmSite."All-time Top 100 Bof Office Fiulms. FilmSite.org. 2011. Web. 23 May 2011. Finney, Angus. The International Film Business: A Market Guide Beyond Hollywood. Oxon: Taylor & Francis, 2010. GameAxis Unwired. "The Future of 3D." GameAxis Unwired, 2008. Lott, Ray. The American martial arts film. Jefferson, NC: McFarland, 2004. Mann, Denise. Hollywood independents: the postwar talent takeover. Minneapolis, MN: University of Minnesotta Press, 2008. McPhail, Thomas. Global Communication: Theories, Stakeholders, and Trends. Chicester: John Wiley and Sons, 2010. Mintz, Steven and Roberts, Randy. (2010). Hollywood's America: Twentieth-Century America Through Film. Chicester: John Wiley and Sons. Motion Picture Association of America (MPAA). (2010). "Response of the Motion Picture Association (MPA) to the European Commission's Reflection Document 'Creative Content in a European Digital Single Market: Challenges for the Future.'" MPAA. 2010. Web. 22 May 2011. MPAA, Theatrical Market Statistics 2010. MPAA. 2010. Web. May 23 2011. Prince, Stephen. (2002). A New Pot of Gold: Hollywood Under the Electronic Rainbow, 1980-1989. Berkeley: University of California Press. Schreer, Oliver, Kauff, Peter and Sikora, Thomas. 3D videocommunication: algorithms, concepts, and real-time systems in human centred communication. Chicester: John Wiley and Sons, 2005. Stringer, Julian. Movie blockbusters. London: Routledge, 2003. Taylor, Jeffrey. Film Finance for Beginners. Film Finance for Beginners. Jeffrey Taylor, 2010. Vanhala, Helena. Depiction of Terrorists in Blockbuster Hollywood Films, 1980-2001: An Analytical Study. Jefferson, NC: McFarland, 2011. Read More