THE MOVIE ENTERTIANMENT INDUSTRY (THE CURRENT ISSUES) The commercialization of leisure in modern America has been brought about by the steep rise of incomes, effectively establishing entertainment as a major industry today. For Hollywood, this phenomenon is both good and bad news…
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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
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(The Movie Entertainment Industry ( Current Issues ) Research Paper)
“The Movie Entertainment Industry ( Current Issues ) Research Paper”, n.d. https://studentshare.org/macro-microeconomics/1423144-the-movie-entertianment-industry-the-current.
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